The ESPN sports network agreed to pay Major League Baseball $5.6 billion over eight years for a package of television and digital rights through the 2021 season, a deal that reflects the strong demand for live sports content.
ESPN, a major profit driver for owner Walt Disney Co, will pay baseball an average of $700 million a year, three sources who asked to remain anonymous said on Tuesday. The sum is nearly double the fee the cable network pays now.
The deal sets a record for baseball broadcasting rights, said Major League Baseball Commissioner Bud Selig, who declined to disclose the financial terms. Payments, minus overhead, will be split evenly among the league's 30 teams.
Sporting events are among the shrinking number of broadcasts that viewers watch live without skipping commercials, and therefore reap some of the highest rates from advertisers. That fact has drawn more bidders to sports programming, driving prices higher and providing a boon to sports teams.
Under the new baseball deal, ESPN retained and expanded its rights for cable television broadcasts and digital content on ESPN websites and the Watch ESPN application, which provides a live feed of ESPN broadcasts on mobile devices.
For ESPN, the deal secures valuable programming that stretches from spring training through the October playoffs, ESPN President John Skipper told reporters on a conference call.
"We have just increased the quality and volume of our content," Skipper told reporters on a conference call. "Baseball remains the national pastime."
ESPN will retain rights to "Sunday Night Baseball," Monday and Wednesday night games, and highlights for "Baseball Tonight," the network said in a statement. ESPN also gains one post-season game annually during the Wild Card round of the playoffs, plus any regular season tie-breakers.
The agreement, which starts in 2014, also includes digital, international and radio rights. ESPN will be able to run more content on its TV and digital platforms, including a new daily baseball show. The number of regular-season games it broadcasts each year will increase to 90 from 80, including four games during the pennant race in the last two weeks of September. Each team plays 162 regular season games per year.
Now, ESPN pays about $306 million annually to Major League Baseball for domestic television rights, and about $50 million for digital, international and radio rights.
The jump in payments from ESPN "is another indication of the increasing value of sports programming," said Marc Ganis, a Chicago sports consultant and president of SportsCorp Ltd.
The bigger rights deals also are helping to lift the value of sports teams. For big-market teams, local broadcast rights can bring even bigger payments than national network deals. The Los Angeles Dodgers, for example, sold this year for $2.15 billion, and the team has begun preliminary talks with Fox Sports about a multi-billion cable deal.
ESPN's baseball agreement follows last year's $15.2 billion deal between ESPN and the National Football League that will keep "Monday Night Football" on the network through 2021.
The big checks ESPN is writing for content have sparked complaints from cable and satellite operators and the costs of carrying the network. ESPN receives about $5 a month for each subscriber, more than any other network, according to SNL Kagan.
Skipper said ESPN will not seek to make up the higher cost through additional payments from cable operators. "We are not going to our distributors to ask for an increase," he said.
But other networks trying to negotiate baseball rights with the league should expect their costs to rise sharply, Ganis said. Current deals with News Corp's Fox and Time Warner Inc's TBS are set to expire in 2013. Comcast Corp's NBC Sports network also is trying to beef up its programming to compete with ESPN.
Other networks "may get more product, but they are going to pay significantly more money," Ganis said. "ESPN is the benchmark."
Selig said baseball was in talks about other rights deals and he hoped to have more announcements soon.
Disney shares closed flat at $49.63 on the New York Stock Exchange.
(Reporting By Lisa Richwine and Steve Ginsburg; editing by Carol Bishopric)